Opec warns Europe on oil

Day one of the Opec summit in Caracas

If the European Union releases emergency oil supplies to force down prices, oil producers could cut production in return, the president of the Organisation of Petroleum Exporting Countries (Opec) has warned.

Ali Rodriguez, who is also Venezuela's oil minister, said Opec could be forced to take back recent production hikes to drive up world oil prices again.

Earlier, Mr Rodriguez told reporters he had reason to suspect some EU nations were already drawing on their oil reserves.

His comments came as as heads of state and government of the Organisation of Petroleum Exporting Countries (Opec) sat down for their first summit in 25 years, in the Venezuelan capital Caracas.

In the United States, meanwhile, President Bill Clinton defended his decision to tap into his country's strategic oil reserves.

He said the US government supported the target price range set by Opec of $22 to $28 per barrel of crude oil.

Crude oil prices recently peaked at a 10-year high of more than $35, but have fallen back to just over $30 after the US announcement.

High profile

The two-day Opec summit - only the second in the organisation's history - comes amid widespread concern in major consuming countries about high oil prices.

As prices climbed from a low of $10 a barrel 18 months ago to recent highs, the profile of the 40-year-old producers' cartel has risen again.

The organisation has shown an unusual degree of cohesion in recent months, and after sorting out a few differences, a meeting of Opec's finance, economics and energy ministers agreed on Wednesday on the wording of a final declaration to be published at the end of the summit.

Nigeria's president Olusegun Obasanjo said Opec would be "mindful of the fact that if oil prices are too high it damages the economies not only of developed countries but also of developing non-oil producing countries".

Confusion over European reserves

Gilles Gantelet, spokesman for EU transport and energy commissioner Loyola de Palacio said dipping into oil reserves would not violate EU regulations.

"It is technically possible that certain countries are using their reserves without us knowing it."

This would, he added, violate regulations, which state that emergency reserves are only to be used when they fall below the minimum of 90 days supply.

Summit begins

Before the first session of the Opec summit began, Algeria's oil and energy minister Chakib Khelil said Opec member states wanted oil price stability to safeguard the interests of developing countries.

He suggested a price of $25 a barrel.

But analysts said Opec members would be in celebratory mood and were unlikely to announce major strategy initiatives.

Hawkish noises

However, some delegates have already been making hawkish noises following the US government's decision earlier this week to release oil from its strategic reserves in an attempt to drive down prices.

Libyan Oil Minister Abdullah al-Badri warned that if the EU followed suit, Opec might be forced to cut back output.

Opec leaders are unlikely to launch major initiatives

His comments were echoed by Mr Rodriguez, also Opec president, who said: "[A release] might provoke a downward movement [in prices] so big that it would oblige Opec to take some decision."

Consuming countries have been calling for an increase in production, hoping that prices will fall if there is more oil in the market.

Opec has blamed crude oil price developments on the activities of market speculators and said pump prices are high for consumers because of taxes levied by their governments.

Mostly unsympathetic

Having seen crude prices slump below $10 a barrel in early 1998, Opec members are now enjoying prices about three times that level and are mostly unsympathetic to pleas from the industrialised nations.

Venezuela has been among the most vociferous defenders of current price levels, repeatedly claiming that prices are "not high, but fair".

Others thought to hold more moderate views, including Saudi Arabia - the world's largest oil producer and exporter - have said little publicly, in the interests of maintaining Opec's new-found united front.

The organisation has said it favours keeping prices in a range of $22-28 a barrel and will raise or trim output to achieve this.

But consuming countries have been critical, saying not enough is being done to make more supplies available.

Crude oil prices had been hovering around 10-year highs until the US decision to open its reserves.

On Tuesday, the price of the world benchmark Brent crude for November delivery closed at $30.40 a barrel in London, down from last week's decade-long peak of nearly $35 a barrel.